On Tuesday, Wolfe Research initiated coverage on Snap Inc (NYSE:SNAP) stock with a Peer Perform rating. The firm set a fair value (FV) range for Snap shares between $13 and $24, based on the projected financials for the fiscal year 2025.
This valuation is pegged to an EV/EBITDA multiple range of 35x to 48x, which is above the median for comparable digital advertising companies but aligns with ad platforms of a similar scale.
The coverage launch reflects Wolfe Research's position that Snap's slowing revenue growth, coupled with persistent macroeconomic uncertainty and subdued user engagement, may only allow for modest margin improvements without a corresponding acceleration in growth. Despite these concerns, the firm views the risk/reward balance for Snap's stock as even at the current levels.
Snap's stock is presently trading at approximately 37.3 times its estimated 2025 EV/EBITDA, which is a 14.5 times premium compared to Pinterest (NYSE:PINS), versus the company's two-year historical median of 23.4 times EV/EBITDA and an 11.9 times median premium over Pinterest.
Wolfe Research's analysis indicates that while Snap's valuation is above the median for its peer group, it is considered reasonable given the uncertain growth trajectory and the potential for margin expansion without significant top-line growth. The fair value range provided by Wolfe Research suggests a cautious outlook on Snap's ability to navigate current market challenges while also recognizing the potential for financial improvement.
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